By Nathan Besh, Senior Director, Product Management and Technical Evangelism, Apptio
Technology Business Management (TBM), a best practice discipline for IT business management; and FinOps, the financial operating model for public cloud consumption, share the same goal of defining IT by impact rather than spend.
TBM was built to serve the needs of on-prem IT with data-driven decision-making to manage, plan, and optimize spend. TBM has incorporated data-driven decision-making for the cloud but doesn’t manage the complexities of allocating cloud costs and the prescriptive methods of controlling those costs. TBM looks at the “what” of all IT spend, including a macro view of cloud spend.
By bringing together people (and data) from IT finance, operations, and business, TBM creates a community of stakeholders to manage all IT.
FinOps was born for the cloud. Systems, best practices, and cultures increase an organization’s ability to understand cloud costs and make informed and timely balancing decisions. FinOps focuses on optimizing the cost and utilization of the cloud through technical and organizational means.
FinOps puts the responsibility for cloud costs in the hands of cloud practitioners. Senior management has a say in what to do, but not how. Application owners, especially cloud practitioners, are better resource managers when they have the visibility and ability to manage their cloud-related costs. FinOps gives organizations the ability to develop responsible cloud users.
Senior management sets strategic direction, but relies on tactics (e.g. budget is X; application delivery costs cannot exceed Y per unit). Cloud practitioners provision and optimize cloud resources to meet these guidelines and keep stakeholders informed and prepared for rapid change, creating a flexible, resilient, and efficient organization.
The use of TBM and FinOps in a given company will largely be based on the characteristics of each company’s IT spending. If IT costs are large and complex, TBM will be suitable whether multi-cloud is used or not. FinOps is needed when an organization has adopted the changing spending patterns of public cloud services, regardless of the size and complexity of overall IT spending. When both conditions exist, use both principles.
TBM is like Google Maps: it helps you navigate from city to city and gives you macro images. For cloud services, FinOps is the windshield and dashboard that you use to maintain speed, grip the road, avoid hitting other vehicles, stop and accelerate, and more. You need both, a macro view with instructions on where to go and a real-time tactical view to get there most effectively.
Hybrid IT, which relies on traditional, largely on-premises technologies, as well as public cloud-based services, needs both TBM and IT perspectives. They support the same valuable conversations, but TBM adopts a top-down IT scale data approach with monthly reporting from different perspectives. In contrast, FinOps takes a bottom-up approach to real-time cloud data. Together, they provide a top-down view of IT costs, providing insight into the business value of IT.
Consider this scenario: Workloads are migrated from on-premises infrastructure to public cloud services. To do this wisely, it’s important to understand the cost and consumption of these workloads before migrating them, including the costs that will be retained by your business. TBM allows you to do this by using data to provide transparency on the total cost of ownership of applications and infrastructure.
For companies with FinOps, TBM addresses a unique public cloud consumption challenge: scalable and changing hourly consumption patterns that can quickly consume an entire month’s budget. or in extreme cases an entire year. TBM’s usual cadence of monthly reporting is insufficient. FinOps provides the discipline, tools, and data to manage public cloud consumption in near real-time; use that data to optimize usage; and build the culture to continually increase your cloud efficiency and capability.
With the ability to tune and optimize every one of the thousands and millions of lines of cloud resources, FinOps focuses on working with the details. TBM informs about all IT costs with general ledger data (e.g., labor costs, licensing, revenue) and operational data from on-prem (e.g., BMC TrueSight), private cloud (e.g., vRealize), and monthly cloud bill data.
In other words, FinOps can work entirely on its own to help maximize innovation in the cloud and integrate into TBM using APIs. Doing both will make both better. If you only do one, you need key inputs, stakeholders and mutual understanding with the other.
FinOps, TBM, and development teams support the cloud economy. Get started with detailed cloud data from FinOps and GL labor, costs, and revenue. Together, they provide impactful cloud chargebacks. If you are using the cloud, there is no FinOps process, the chargeback may not be accurate. When IT’s unit economy is in control, then development teams, your organization’s innovation engine, are unlocked because they don’t have to do costly rework or stop innovating to rebuild solutions. does not meet the organization’s efficiency requirements.
For most companies with both TBM and FinOps, they are owned and operated by two different but collaborative groups. Clearly, TBM and FinOps must be on the same page regarding these types of decisions.
FinOps and TBM provide complete and accurate IT unit cost economics. A higher percentage of cloud spend, managed by FinOps principles, produces more accurate unit costs. Unit economics is organization and workload-specific — there is no universally accepted metric for specific verticals (e.g. hospitals with different KPIs for patient care inpatient and emergency services; transportation company costs vary by mode of transport). FinOps and TBM aggregate data and apply best practices to reduce cloud unit economics, but the organization still needs to determine how to implement that in conjunction with its overall strategy.
FinOps and TBM drive IT efficiency and gauge customer satisfaction, a leading indicator of increased revenue. For example, by running tests, the DevOps team might discover that improving the infrastructure can cut the time to 400 milliseconds, but the cost goes up to $0.011 per stream. That’s a 10% increase in cost, but they also find that customers begin consuming 20% more paid content. Driving up IT spend to improve customer experience has diminishing returns. Business leaders and DevOps must ask: “How far should we push innovation resulting in increased IT spend versus TBM, and FinOps measures the business value of the new IT operating model while releasing the brake on cloud adoption.
Apptio develops technology business management software as a service application. Apptio enterprise apps are designed to assess and communicate the cost of IT services for planning, budgeting, and forecasting purposes.